Watching the Cost of Employee Benefits Rise in Philadelphia

A new report [PDF] out from the Pew Charitable Trusts' Philadelphia Research Initiative takes a look at some key indicators of the state of the city – population, crime stats, home sales.

One especially interesting chart shows a categorical breakdown of the city's budgets for the current fiscal year and that of fiscal year 2003. The important piece of the pie here is the gray wedge showing "Employee Benefits." This represents employee pensions, health insurance and other benefits. While most categories in this chart changed only slightly over this 10-year period, employee benefits have seen a huge increase, jumping from 20 percent of the general budget to 32 percent.

Source: Pew Charitable Trusts Philadelphia Research Initiative

According to the $3.09 billion budget for the 2003 fiscal year [PDF], the city's employee benefits obligations totaled $528 million – $211 million for pensions and $317 for "other employee benefits." That was a 5.39 percent increase from the $501 million the year before – itself a 3.69 percent increase from the $483 million the year before that. These increases are nothing new, but their pace is quickening.

For the $3.589 billion budget for the 2013 fiscal year, employee benefits have jumped to $1.116 billion – $629 million for pensions and $487 million for other benefits.

While the city budget grew by only 16.15 percent over the last decade, employee benefits obligations grew by more than 111 percent. This trend is likely to continue.

As we reported earlier, rapidly increasing employee pension and benefit costs have been potent elements in the fiscal situation that has caused – and likely will continue to cause – the bankruptcies seen recently in California.

This pie chart of Philadelphia's changing employee benefit obligations shows a clear example of what city financial managers will be forced to contend with in the coming years and what they will want to pay more attention to in order to avoid following in the footsteps of California's bankrupt cities.